Individual Development Accounts:A strategy for fostering social and
economic participation
Asset Development & Tax Policy2004 Disability Program Navigator Series
October 21, 2004
Tobey Davies, School of Community Economic Development
Introduction
• Asset Building policies
•Relevant of social & economic theories
• Strategies, particularly IDAs
•NH Statewide IDA Collaborative
•Research
Reality
“Few people have spent their way out of being poor. Those who do do so by saving and investing for
long term goals.”
– Michael Sherridan, Assets and the Poor
Theory discussion
Internal locus of control
•life satisfaction
•ability to mobilize resources
Role theory
•Adapting to expectations, rules, circumstances.
Policies
• Assets for Independence Act
• Tax policy
• Healthcare
• Social Security
• Housing and Urban Development
Bipartisan support
• Conservatives likely to view assets as vehicle for self-reliance
•Liberals often view as re-distribution of resources
Assets for Independence Act
Passed with bipartisan support in 1998 Designed to provide funds to states for
Individual Development Accounts 1:1 match Eligible: EITC eligible; 200% of poverty;
eligible for TANF. Must work or have an eligible working
member of the same household.
“Making Work Pay”(Center on Budget and Policy Priorities, 2003)
Earned Income Tax Credit Work incentive to workers and self
employed Available to child & childless singles.
Must file for taxes
EITC, cont.
For workers w/o children between ages of 25-65, credit exceeds $382
Gives back some or all of federal income tax taken out of pay.
May get additional cash back from IRS
EITC, cont.
Even workers whose earnings too small to have paid credit, can still get EITC.
- employer-paid disability benefits qualify as earned income
- Adult children may qualify as “qualifying child” & also meet Child tax credit.
Medicaid Buy In Programs
Work incentive: maintaining healthcare coverage
Sliding fee scale
Income standards for eligibility
Changed treatment of savings from earnings
Social Security Work Incentives
2 for 1 disregard
Impairment related work expenses
Plans for Achieving Self Support
Unencumbered Business Expenses
Other mechanisms for asset building
Independence Building Accounts
Special Needs Trusts*
*Not owned by beneficiaries
Social Security Protection Act 2003
For a period of 9 months…. Disregard retroactive checks from SSA or
SSI
EITC refunds
Child Tax Credit refunds
SSPA 2003, cont.
Effective June 2004, disregarding: All education related income, scholarship, fellowships, and gifts income.
Not counting as a resource in SSI for 9 months
SSPA, cont.
Individual Development Accounts Allowable to individuals
Disregard income placed in exempt IDA, reducing countable income
Adapting economic policy to create the means for social outcome.
Other policies
Section 8 Home Ownership Voucher
CARE Act, S.476 = 300,000 IDAs
Special Needs Trusts*
Background NHCLF (CDFI)
Mission
To serve as a catalyst, leveraging financial, human, and civic resources to enable traditionally under-served people to participate more fully in NH economy.
Strategies
•Provide loans, capital, and technical assistance
•Complementing and extending the reach of conventional lenders and public institutions; and
•Bringing people and institutions together to solve problems
NH Statewide IDA Collaborative
AFIA-funded Statewide IDA Collaborative designed to help eligible low income
workers of New Hampshire achieve the dream of homeownership, post-secondary
education or small business startup/development.
Eligibility and Uses
Eligibility– 200% Poverty– EITC Eligible– TANF Eligible
Savings Categories– Homeownership– Post-Secondary Education– Small Business Startup/Development
Pilot Savings Categories– Home Repairs– Vehicle Ownership
Match Structure
3:1 match $25/month minimum savings $100/month maximum savings $1,000/year savings cap $2,000 lifetime savings cap
$6,000 maximum match per individual
Organizational Structure
• 20 Community Partners – Front End
• NHCLF- Backroom Operations
• Financial Institutions – Hold IDA Accounts
•Other Partners – Provide training and referrals
Community Partners: Front-end
•Serve the eligible population (recruitment)
• Facilitate IDA Application Process/Paperwork
• One-on-One Counseling
• Financial Literacy & Asset Training
NHCLF – Backroom Operations
• Raise Match Funds
• Provide Technical Assistance and
• Tracking Savings, Match & Training
• Match Savings Statements
• Central Coordinating Agency of all Partners
Financial Institutions
• Specific Features
•Custodial
•No Fees & Interest Earning
•Duplicate Statements (1 to client, 1 to NHCLF)
•Provide Funding for the IDA Collaborative
• Training and TA on financial education topics
Other Partners
Other Partners include: Cooperative Extensions, Homebuyer Education Centers, Higher Education Assistance Centers
Provide Financial Fitness and/or Asset Specific Training
Work with Community Partners to enhance/develop curriculums
NH Statewide IDA Collaborative highlights….
Each Community Partner holds “ownership” over their Program.
Program rules/updates are discussed at Quarterly Community Partner Meetings
NHCLF Provides no operational dollars to the partners to run the Program
MoneyWorksCommunity Partner
An initiative of Project Dollars and Sense
Tied eligibility to working people with disabilities eligible for SSI or SSDI
Savings for home ownership; college; business
Problem
Real or perceived financial disincentives
Difficulty navigating public benefit system
Un-served or under-served by financial institutions
Low-wages
Lack of support
Goals
Plan public benefits necessary in order to work and improve economic well-being
Use financial services successfully
Develop positive financial habits and credit history
Methods
Integrated counseling (benefits, credit, asset training)
Peer Support
Financial education workshops
Affordable financial services
Individual Development Accounts
Money Works Infrastructure
$ CDFI $
Credit Union
Benefit
Planners
Self Help Groups
Certified
Credit
Counselors
Affordable Housing Group
Personal Benefits Planning
Current situation assessment
Income projections and work incentive options
Information and referral
Follow up as needed
Certified Credit Counseling
• Credit history & recommendations
• Spending & Savings Plans
• Credit Use and management
• Survival skills in the marketplace
• Preparing for asset goal
Peer Support
• Savings clubs and buying coops
• Managing illness and financial wellness
• Organization skills
• Navigating marketplace
• Working toward goals
NH Statewide IDA Collaborative highlights….
After 3 years…– 565 Total Enrolled 330 Actively Enrolled
281 Home; 21 Education; 22 Business; 6 Other
– 78 Graduates of Homeownership (as of 10/21/04)– $532,106 Saved– $1,350,695 Matched– $ 384,940 Match Paid Out
Research
• Asset Accumulation & Tax Policy (NIDRR)
• LIFE Account Feasibility Study & Implementation Plan (CMS)
• National Tax Facts Coalition
• Youth Transition Grants – SSA
Resources
Corporation for Enterprise Development (CFED): www.cfed.org
World Institute on Disability: www.wid.org/equity
Center for Social Development: www.gwbweb.wustl.edu/csd
Center on Budget & Policy Priorities: www.cbpp.org
Contact Information
Tobey DaviesCenter for CED and DisabilitySchool of CED/SNHU2500 No. River RoadManchester, NH 03106-1045
Phone: 603-644-3103 Fax:[email protected]
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