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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 l.jpg

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 l.jpg
Introduction

  • Asset Building policies

  • Relevant of social & economic theories

  • Strategies, particularly IDAs

  • NH Statewide IDA Collaborative

  • Research


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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


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Theory discussion

  • Internal locus of control

    • life satisfaction

    • ability to mobilize resources

  • Role theory

    • Adapting to expectations, rules, circumstances.


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Policies

  • Assets for Independence Act

  • Tax policy

  • Healthcare

  • Social Security

  • Housing and Urban Development


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Bipartisan support

  • Conservatives likely to view assets as vehicle for self-reliance

  • Liberals often view as re-distribution of resources


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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.


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“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


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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


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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.


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Medicaid Buy In Programs

  • Work incentive: maintaining healthcare coverage

  • Sliding fee scale

  • Income standards for eligibility

  • Changed treatment of savings from earnings


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Social Security Work Incentives

  • 2 for 1 disregard

  • Impairment related work expenses

  • Plans for Achieving Self Support

  • Unencumbered Business Expenses


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Other mechanisms for asset building

  • Independence Building Accounts

  • Special Needs Trusts*

    *Not owned by beneficiaries


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Social Security Protection Act 2003

For a period of 9 months….

  • Disregard retroactive checks from SSA or SSI

  • EITC refunds

  • Child Tax Credit refunds


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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


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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.


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Other policies

  • Section 8 Home Ownership Voucher

  • CARE Act, S.476 = 300,000 IDAs

  • Special Needs Trusts*


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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.


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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


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Program Areas

  • Affordable housing

  • Community facilities

  • Economic opportunity


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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.


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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


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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


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Organizational Structure

  • 20 Community Partners – Front End

  • NHCLF- Backroom Operations

  • Financial Institutions – Hold IDA Accounts

  • Other Partners – Provide training and referrals


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Community Partners: Front-end

  • Serve the eligible population (recruitment)

  • Facilitate IDA Application Process/Paperwork

  • One-on-One Counseling

  • Financial Literacy & Asset Training


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NHCLF – Backroom Operations

  • Raise Match Funds

  • Provide Technical Assistance and

  • Tracking Savings, Match & Training

  • Match Savings Statements

  • Central Coordinating Agency of all Partners


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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


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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


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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….


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MoneyWorks Program. Community 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 l.jpg
Problem Program.

  • Real or perceived financial disincentives

  • Difficulty navigating public benefit system

  • Un-served or under-served by financial institutions

  • Low-wages

  • Lack of support


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Goals Program.

  • Plan public benefits necessary in order to work and improve economic well-being

  • Use financial services successfully

  • Develop positive financial habits and credit history


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Methods Program.

  • Integrated counseling (benefits, credit, asset training)

  • Peer Support

  • Financial education workshops

  • Affordable financial services

  • Individual Development Accounts


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Self Help Groups Program.

Certified

Credit

Counselors

Benefit

Planners

Credit Union

Money Works Infrastructure

$ CDFI $

Affordable Housing Group


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Personal Benefits Planning Program.

  • Current situation assessment

  • Income projections and work incentive options

  • Information and referral

  • Follow up as needed


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Certified Credit Counseling Program.

  • Credit history & recommendations

  • Spending & Savings Plans

  • Credit Use and management

  • Survival skills in the marketplace

  • Preparing for asset goal


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Asset Based Training Program.

  • Home Ownership

  • Postsecondary education

  • Self employment


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Peer Support Program.

  • Savings clubs and buying coops

  • Managing illness and financial wellness

  • Organization skills

  • Navigating marketplace

  • Working toward goals


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Equity building…. Program.

MNHS

$25,000

NHHFA

$5,000

CPI

$20,000

IDA

$3,600

DMHD

$2,500

FHLB

$12,000


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NH Statewide IDA Collaborative highlights…. Program.

  • 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


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Research Program.

  • Asset Accumulation & Tax Policy (NIDRR)

  • LIFE Account Feasibility Study & Implementation Plan (CMS)

  • National Tax Facts Coalition

  • Youth Transition Grants – SSA


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Resources Program.

  • 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


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Contact Information Program.

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

t.davies@snhu.edu