Individual Development Accounts (IDAs): Background and Current Legislation for Federal Grant Programs to Help Low-Income Families Save Page: 2 of 6
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IDA programs are operated by community-based organizations (including faith-
based organizations), as well as state and local governments in partnership with
community-based organizations. From the participant's viewpoint, IDAs operate much
like retirement 401(k) plans: the participant makes contributions, which are matched (at
varying rates) by the program. Withdrawals from IDAs are restricted. Funds can be
withdrawn to finance specific activities and purchases - generally, education, the
purchase of a home, and to start a business. An individual's contributions may also be
withdrawn for other purposes, but this leads to the loss of matching funds. In addition to
providing matching funds for accounts, IDA programs also provide financial literacy
education, case management, and supportive services to participants.
This report describes IDA programs funded by two major federal grants: the Assets
for Independence (AFI) Act of 1998 and the Temporary Assistance for Needy Families
(TANF) program created in the 1996 welfare reform law. Other federal initiatives that
provide for more targeted IDAs (e.g., for refugees and for families in assisted housing)
are not discussed in this report.
Assets for Independence Act Demonstrations
The Assets for Independence Act (AFI, P.L. 105-285) authorized up to $25 million
per year for FY1999 to 2003 for competitively awarded IDA demonstration programs.1
Congress has continued the AFI program absent an authorization. The Department of
Health and Human Service (HHS) administers the AFI program.
Table 1 provides a funding history for IDAs under the AFI program. In recent years,
funding has been near the old $25 million authorization level. President Bush's FY2009
budget would fund AFI at $24.025 million, the same funding as provided for FY2008.
AFI grantees must raise nonfederal funds to operate AFI IDAs. The AFI federal
grant cannot exceed the amount of nonfederal resources raised for the program. The
maximum federal grant under the AFI program is $1 million.
What Types of Organizations May Operate AFI IDAs? The AFI Act
authorizes competitive grants for IDA programs to nonprofit organizations;2 state, local,
and tribal governments that apply with non-profits; credit unions; and organizations
designated by the Secretary of the Treasury as community development financial
institutions. Credit unions and community development financial institutions must
demonstrate a collaborative relationship with local community-based organizations whose
activities are designed to address poverty. Faith-based organizations may also operate
IDA programs.
1 The AFI Act IDA program was subsequently amended by P.L. 106-554.
2 Defined as organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986.
Exempt from taxation under Section 501(a) of the tax code.
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Falk, Gene. Individual Development Accounts (IDAs): Background and Current Legislation for Federal Grant Programs to Help Low-Income Families Save, report, March 3, 2008; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc808190/m1/2/?q=%22Falk%2C+Gene%22: accessed June 12, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.