EQUITY Responds: WID Answers Your Questions
Q: I live in a county where there is no federally-funded individual development account program. There is a program that is funded by private funders and the state, but I worry about how that will affect my benefits. Can a person on benefits safely participate in a state-funded IDA program?
A: Yes, a person who currently receives benefits can safely participate in a state-funded IDA program, but there are a few simple rules you will need to follow.
First, good for you for recognizing that not all IDA programs are created equally. Federally-funded IDA programs include an income and asset disregard for people receiving benefits, such as SSI and Medicaid. This means that both the earned income contributed to a federally-funded IDA and the program match are not counted as income or as an asset for purposes of benefit calculation.
Alternatively, state and privately-funded IDA programs do not enjoy either the income or the asset disregard. Thus, the earned income you place into a state-funded IDA program is part of the countable income calculation for SSI purposes. Additionally, if the IDA account was held in your name, the value in that account could be counted as an asset, subject to the $2,000 limit for individuals.
Several state IDA programs have avoided the countable asset issue by having the IDA account held in the name of a custodian. The account would directly fund the savings goal by transferring the accumulated savings directly to the vendor of the product or service. In this way, the account is not in the name of the benefits recipient, and cannot be considered a countable asset. Make sure your IDA program is willing to use a custodial account to avoid the countable asset limit issue.
State-funded IDA accounts do provide more flexibility in their savings goals. While Federal programs’ savings goals are limited to education, home purchase and small business, state programs often allow for purchases of automobiles, adaptive equipment, and vocational or special job training.
In the end, the benefits planning opportunities in a state-funded IDA account are more limited; however, they are still very useful tools to take control of your financial future.