TN 42 (05-01)

Citations:

Sections 404-416 of P.L. 105-285 (The Assets for Independence Act); 42 U.S.C. 604 Note; Section 415 P.L. 106-554 (The Consolidated Appropriations Act, 2001)

A. Background

1. What is an Individual Development Account (IDA)?

An IDA is a special bank account that helps an individual save for his/her education, the purchase of a first home, or to start a business. He/she uses earnings from his/her work to set up an approved bank account for an IDA.

2. How Does a Demonstration Project IDA Help an Individual's Money to Grow?

An individual contributes money from his/her earnings to an IDA. His/her contributions are matched with money from special funds called “Demonstration Project” money. The matching money helps the individual reach his/her goal sooner.

3. Who is Eligible for a Demonstration Project IDA?

If an individual is working and either receiving TANF OR has low income and assets, he/she may be eligible for a Demonstration Project IDA.

4. What is the Statutory Authority for Demonstration Project IDAs?

The Assets for Independence Act (enacted 1/27/98) created a Federal Demonstration Project to test the effectiveness of IDAs in improving the lives of participating low-income persons. This Act provides for Demonstration Project monies to carry out a program to fund IDAs.

5. Who Determines Whether an Individual Is Eligible for an IDA?

The agency that has been approved to authorize IDAs using Demonstration Project funds decides who is eligible for an IDA.

NOTE: SSA does not determine whether an individual is eligible for an IDA.

6. What Federal Agency Oversees the IDA Programs?

The Administration for Children and Families (ACF) oversees the TANF and Demonstration Project IDA programs. (TANF IDAs are explained in SI 01130.678.)

7. What Other Information is Available About Demonstration Project IDAs?

A spotlight on IDAs is in http://www.socialsecurity.gov/ssi/links-to-spotlights.htm#links . See SI 01130.679E.2. for the procedure on responding to inquiries about Demonstration Project IDAs.

B. Definition of Ida Terminology

The following definitions are for your information only. IDA agencies and organizations will apply these definitions to individual cases and determine IDA eligibility. Note that SSA does not determine whether an individual is eligible for an IDA.

1. Qualified Entity

A qualified entity is:

• a not-for-profit organization described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such code; or

• a State or local government agency or a tribal government acting in cooperation with a not-for-profit organization.

2. Qualified Purpose

A qualified purpose is one of the following:

• Postsecondary educational expenses;

• Business capitalization;

• First home purchase.

3. Postsecondary Educational Expenses

Postsecondary educational expenses are:

• Tuition and fees required for the enrollment or attendance of a student at an eligible educational institution; and

• Fees, books, supplies and equipment required for courses of instruction at an eligible educational institution.

IMPORTANT: The charge for room and board, if any, is not a “fee” for purposes of this section. However, the charge for room and board can be an approvable expense under a PASS (SI 00870.025B.5.g.).

4. Eligible Educational Institution

An eligible educational institution is an institution that is described in section 101 or 102 of the Higher Education Act of 1965, or a postsecondary vocational education school (as defined in subparagraph (C) or (D) of the 521 (4) Carl D. Perkins Vocational and Applied Technology Education Act (20 U.S.C. 2471(4)).

5. Qualified Business Capitalization Expenses

Qualified business capitalization expenses are qualified expenditures for the capitalization of a qualified business pursuant to a qualified plan.

6. Qualified Expenditures

Qualified expenditures are expenditures included in a qualified plan, including capital, plant, equipment, working capital, and inventory expenses.

7. Qualified Business

A qualified business is any business that does not contravene any law or public policy.

8. Qualified Plan

A qualified plan is a business plan that:

• Is approved by a financial institution, a microenterprise development organization, or by a nonprofit loan fund having demonstrated fiduciary integrity; and

• Includes a description of the services or goods to be sold, or a marketing plan and projected financial statements.

• May require the eligible individual to obtain the assistance of an experienced entrepreneurial advisor.

9. Qualified First-Time Homebuyer

A qualified first-time homebuyer is an individual participating in the project involved (and, if married, the individual's spouse) who has had no ownership interest in a principal residence during the 3-year period ending on the date of acquisition of the principal residence.

10. Date of Acquisition

The date of acquisition is the date on which a binding contract to acquire, construct, or reconstruct the principal residence is entered into.

11. Principal Residence

A principal residence is a principal residence that costs no more than the limits set by the IDA project.

12. Tribal Government

A tribal government is a tribal organization, as defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b) or a Native Hawaiian organization, as defined in section 9212 of the Native Hawaiian Education Act (20 U.S.C. 7912).

C. Policy - Effective 01/01/01

1. Contributions

An individual's contributions that are deposited in a Demonstration Project IDA are excluded from resources.

2. Matching Funds

Any matching funds that are deposited in a Demonstration Project IDA are excluded from resources.

3. Interest

Any interest earned on the individual's own contributions and on the matching funds that are deposited in a Demonstration Project IDA is excluded from resources.

D. POLICY- Prior to 01/01/01

1. Contributions

An individual's contributions that are deposited in a Demonstration Project IDA are resources.

2. Matching Funds

Any matching funds that are deposited in a Demonstration Project IDA are excluded from income and resources.

3. Interest

• Any interest earned on the individual's own contributions is unearned income when received, and becomes a countable resource in the month after the month of receipt.

• Any interest earned on the matching funds that are deposited in a Demonstration Project IDA is excluded from income and resources.

E. Procedure – Effective 01-01-01

1. How to Verify Demonstration Project IDAs

In both initial claims and redeterminations, use documents in the individual's possession to verify that the account is a Demonstration Project IDA. If such documents are not available, contact the Demonstration Project agency to verify that the account is a Demonstration Project IDA.

2. Responding to Inquiries About Demonstration Project IDAs

If an individual asks about the availability of Demonstration Project IDAs in his/her area, or about the IDA program's rules, check the listing of grantees at ACF's website at http://idaresources.acf.hhs.gov/afigrantees .

F. Procedure - Prior To 01/01/01

In both initial claims and redeterminations, use documents in the individual's possession to verify that the account is a Demonstration Project IDA. If such documents are not available, contact the paying agency or the organization in charge of the Demonstration Project IDA.

G. References

Exclusion from income of TANF-funded IDAs, SI 00830.665

Exclusion from income of Demonstration Project IDAs, SI 00830.670

Exclusion from resources of TANF-funded IDAs, SI 01130.678

Temporary Assistance for Needy Families (TANF), SI 00830.403

Excluded funds commingled with other funds, SI 01130.700