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Individual Development Account (IDA) - Assets for Independence Program

The Assets for Independence Demonstration Program was established by the Assets for Independence Act (AFI Act), under title IV of the Community Opportunities, Accountability and Training and Educational Services Human Services Reauthorization Act of 1998, P.L. 105-285.

The Assets for Independence Demonstration Program is a directed, matched savings program for lower income working individuals and families that permits them to use an Individual Development Account (IDA) to accumulate savings to be used later for specified purposes. Participants enter into a Savings Plan Agreement with the project grantee which establishes a schedule and goal of savings from earned income, to be matched at an agreed rate which can be from one dollar to eight dollars for each dollar saved. Matching contributions are made by the grantee at least quarterly from equal parts of Federal grant funds and non-Federal share contributions to the project. Matched savings may be expended for either (1) the purchase of a principal residence by a first-time home buyer, (2) the capitalization of a business, or (3) expenses of post-secondary education.

The major goals of the program are to provide for the establishment of demonstration projects designed to determine: (1) the social, civic, psychological, and economic effects of providing to individuals and families with limited means an incentive to accumulate assets by saving a portion of their earned income; (2) the extent to which an asset-based policy that promotes saving for post-secondary education, homeownership and small business capitalization may be used to enable individuals and families with limited means to increase their economic self-sufficiency; and (3) the extent to which an asset-based policy stabilizes and improves families and the community in which the families live.

Applicant Eligibility

The Assets for Independence Demonstration Program offers five-year Federal grants to the following eligible applicants:

·          a not-for-profit 501(c)(3) tax-exempt organization;

·          a State, local or Tribal government agency applying jointly with a 501(c)(3) tax exempt organization;

·          a Community Development Financial Institution (CDFI) or a Low Income Credit Union (so designated by the NCUA), provided that the CDFI or Credit Union has a collaborative relationship with a local community-based organization whose activities are designed to address poverty in the community.

Non-Federal Share Required

Applicants must themselves commit or secure a commitment for an amount in cash "non-Federal share" equal to the amount of the Federal grant requested, contingent only on the award of the grant. If the non-Federal share is not to be provided "up front" after the grant award, then the statement of commitment (or agreement with the provider) must include a statement that the schedule of deposits will be coordinated with the opening of new accounts so as to assure that new accounts will only be opened when there are sufficient funds on hand in the "Reserve Fund" to meet the total maximum matching contributions pledged to that account during its lifetime under the "Savings Plan Agreement".

Program Requirement as set out in the AFI Act

The Federal grant and the non-Federal cash are together deposited by the grantee in a Reserve Fund in an insured Financial Institution, normally a bank or a credit union. Over the ensuing five years 15% of the money in that Reserve Fund may be used by the grantee for program administration, participant support (which must include Financial Literacy/Budget Management Education) and collection of data for the government’s evaluation of the program. At least 85% of the money must be used to match the investment of savings from earned income in IDAs by program participants, which is done no less often than every three months.

Under the AFIA the matched savings in the IDA may be used for acquisition of three "assets": the purchase or building of a first home, the capitalization of a business, or the costs of post-secondary education. Until funds are allocated to an IDA as matching contributions, interest they earn in the Reserve Fund may be used by the grantee for program administration and support. Once allocated to an IDA account, interest goes to that account.

Participant Eligibility

Households eligible to participate in the program are those eligible for Temporary Assistance for Needy Families (TANF) or the Earned Income Tax Credit (EITC), or whose income over the previous year was less than 200% of the poverty guidelines. Eligible Households must also be below the net worth limit of $10,000 excluding primary residence and one motor vehicle.

Project Design

When participants are enrolled in the program they enter into a Savings Plan Agreement with the grantee which does several things:

·          it sets a savings/ investment schedule of a certain amount to be deposited by the participant in the IDA at regular intervals;

·          it sets a goal of a total amount to be invested over that time;

·          it identifies the asset to be acquired; and

·          it sets the "match rate" by which the participant’s investment will be matched by money from the Reserve Fund, which may be anywhere from one dollar to eight dollars for each dollar the participant puts into the IDA account.

Most projects use a match rate of one, two, or three to one. Under the AFIA the maximum Federal matching contribution to one IDA account is $2000, which must be deposited with an equal amount of non-Federal dollars, which brings the total amount of match from the Reserve Fund to $4000. The law also sets a maximum Federal matching contribution per household of $4000, for a total of $8000 from the Reserve Fund.

Contact Information for Demonstration Program

ATTN: Sheldon Shalit
Division of Community Demonstration Programs - IDA
Office of Community Services, ACF, DHHS
370 L’Enfant Promenade, SW
Washington, D.C. 20447

TELEPHONE: (202) 401-4807

FAX: (202) 401-5538

Additional Information

The entire text of the ASSETS FOR INDEPENENCE ACT (included in the Community Opportunities, Accountability, and Training and Educational Services Act of 1998) as amended 12/21/2000 is available on the HHS website at:
http://www.acf.hhs.gov/assetbuilding/afialaw2000.html

A briefing book, which was developed by the Corporation for Enterprise Development (CFED) in conjunction with the Center on Budget and Policy Priorities (CBPP), aims to explain the treatment of Individual Development Accounts in Federal programs affecting low-income people. Titled "2002 Federal IDA Briefing Book; How IDAs Affect Eligibility for Federal Programs", it is available in PDF format (requires Adobe Acrobat Reader) at:
http://www.cbpp.org/10-29-02wel.pdf

For Supplemental Security Income (SSI) purposes, any earnings an individual contributes to his/her Demonstration Project IDA are deducted from his/her wages in determining countable income. An individual's contributions that are deposited in a Demonstration Project IDA are excluded from resources. Any matching funds that are deposited in a Demonstration Project IDA, as well as any interest earned on the individual's own contributions and on the matching funds that are deposited in a Demonstration Project IDA are excluded from income and resources. Detailed information about how the Social Security Administration (SSA) treats IDA contributions with respect to income and resources is contained in the POMS Section SI 00830.670 at:
http://policy.ssa.gov/poms.nsf/lnx/0500830670?opendocument

See also:

Individual Development Account (IDA) - Overview

Individual Development Account (IDA) - Details

Individual Development Account (IDA) - Definitions

Individual Development Account (IDA) - State Differences

Source

Information for this topic was drawn from the U.S. Department of Health & Human Services, Office of Community Services (OCS) website at:
http://www.acf.hhs.gov/assetbuilding/assets.html

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