Congressional support builds for individual development account legislation

WASHINGTON – As credit unions forge ahead in helping low-income members save for a new home, pay for education or start a business through individual development accounts (IDA), momentum is building to make these savings vehicles more widely available. The latest House bill, the Savings for Working Families Act (H.R. 1060), was reintroduced on June 15 by Reps. Joseph Pitts (R-Pa.) and Charlie Stenholm (D-Texas), who had introduced similar legislation last year. IDA provisions are also included in the Community Solution Act (H.R. 7), introduced in March by Reps. J.C. Watts (R-Okla.) and Tony Hall (D-Ohio), as well as the Savings Opportunity and Charitable Giving Act (S. 592), introduced in March by Senators Joe Lieberman (D-Ct.) and Rick Santorum (R-Pa) Pitts’ H.R. 1060 is getting another go-around after losing steam in the Senate last year mainly due to lukewarm publicity, said Gabe Neville, Pitts’ press secretary. Approximately 29 community development credit unions are participating in IDA programs working with such organizations as AmericaCorps*VISTA, said Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions. While the federation has been supportive of similar legislation proposed by Lieberman and Santorum, the sticking point is the 100% tax credit that would go to banks for their participation. All matched IDA dollars are kept in a separate account and are paid directly to the qualified financial institutions. When the accountholder has accumulated enough savings and matching funds for the intended purpose and has completed an approved financial education course provided by the qualified financial institution or non-profit, then payments from the IDA will be made directly to the asset provider. IDAs would be available to citizens or legal residents of the U.S., between the ages 18 and 60, whose adjusted gross income does not exceed $20,000 for single investors, $25,000 for heads of households or $40,000 for married couples. Eligible individuals may use their IDA for the benefit of a spouse or a dependent. All IDAs must be held at a qualified financial institution, which is any financial institution eligible to hold an individual retirement account. While deposits are after-tax dollars and interest earned on those deposits is taxable, all matching funds and earnings thereon would be tax-free. Savings will be matched on a one-to-one basis, up to $500 per person per year with unlimited individual contributions. Both private sector and public funds could also be contributed to the accounts and matched in accordance with ratios set by the providers. Credit unions and banks would be eligible for a 100% federal tax credit for all matching funds provided. Financial institutions would also be reimbursed for a limited amount of the program and administrative costs incurred, including; a one time $100 per account credit for financial education recruiting marketing administration, withdrawals, etc., plus an annual $30 per account credit for the administrative cost of maintaining the account. -