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Individual Development Accounts: A strategy for fostering social and economic participation. Asset Development & Tax Policy 2004 Disability Program Navigator Series October 21, 2004 Tobey Davies, School of Community Economic Development. Introduction. Asset Building policies

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individual development accounts a strategy for fostering social and economic participation

Individual Development Accounts:A strategy for fostering social and economic participation

Asset Development & Tax Policy

2004 Disability Program Navigator Series

October 21, 2004

Tobey Davies, School of Community Economic Development

introduction
Introduction
  • Asset Building policies
  • Relevant of social & economic theories
  • Strategies, particularly IDAs
  • NH Statewide IDA Collaborative
  • Research
reality
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
Theory discussion
  • Internal locus of control
    • life satisfaction
    • ability to mobilize resources
  • Role theory
    • Adapting to expectations, rules, circumstances.
policies
Policies
  • Assets for Independence Act
  • Tax policy
  • Healthcare
  • Social Security
  • Housing and Urban Development
bipartisan support
Bipartisan support
  • Conservatives likely to view assets as vehicle for self-reliance
  • Liberals often view as re-distribution of resources
assets for independence act
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
“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
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 cont10
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
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
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
Other mechanisms for asset building
  • Independence Building Accounts
  • Special Needs Trusts*

*Not owned by beneficiaries

social security protection act 2003
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
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
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
Other policies
  • Section 8 Home Ownership Voucher
  • CARE Act, S.476 = 300,000 IDAs
  • Special Needs Trusts*
background nhclf cdfi
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
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
program areas
Program Areas
  • Affordable housing
  • Community facilities
  • Economic opportunity
nh statewide ida collaborative
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 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
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
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
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
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
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
  • 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

NH Statewide IDA Collaborative highlights….
moneyworks community partner
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
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
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
Methods
  • Integrated counseling (benefits, credit, asset training)
  • Peer Support
  • Financial education workshops
  • Affordable financial services
  • Individual Development Accounts
money works infrastructure

Self Help Groups

Certified

Credit

Counselors

Benefit

Planners

Credit Union

Money Works Infrastructure

$ CDFI $

Affordable Housing Group

personal benefits planning
Personal Benefits Planning
  • Current situation assessment
  • Income projections and work incentive options
  • Information and referral
  • Follow up as needed
certified credit counseling
Certified Credit Counseling
  • Credit history & recommendations
  • Spending & Savings Plans
  • Credit Use and management
  • Survival skills in the marketplace
  • Preparing for asset goal
asset based training
Asset Based Training
  • Home Ownership
  • Postsecondary education
  • Self employment
peer support
Peer Support
  • Savings clubs and buying coops
  • Managing illness and financial wellness
  • Organization skills
  • Navigating marketplace
  • Working toward goals
equity building
Equity building….

MNHS

$25,000

NHHFA

$5,000

CPI

$20,000

IDA

$3,600

DMHD

$2,500

FHLB

$12,000

nh statewide ida collaborative highlights40
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
Research
  • Asset Accumulation & Tax Policy (NIDRR)
  • LIFE Account Feasibility Study & Implementation Plan (CMS)
  • National Tax Facts Coalition
  • Youth Transition Grants – SSA
resources
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
Contact Information

Tobey Davies

Center for CED and Disability

School of CED/SNHU

2500 No. River Road

Manchester, NH 03106-1045

Phone: 603-644-3103

Fax:603-644-3103

[email protected]

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