CASH Coalition of Western New York: Advocacy

Advocacy

Savings for Working Families Act (S. 871 & H.R. 1514)
The Savings for Working Families Act (SWFA) ensures that our nation's savings and ownership policies assist working-poor families by enabling them to save, build wealth, and enter the financial mainstream through the use of a financial product tailored to their needs: individual development accounts (IDAs).

IDAs are matched savings accounts that help low-income families build appreciating assets and become financially self-reliant. The accounts are used for three purposes:

buying a first home;
paying for post-secondary education; or
starting or expanding a small business.

With bi-partisan and bi-cameral support, Senators Joe Lieberman (I-CT) and Jim Bunning (R-KY) together with Senators Blanche Lincoln (D-AR), Olympia Snowe (R-ME), John Kerry (D-MA) and Susan Collins (RME) as original sponsors introduced the $1.4 billion tax credit bill in the Senate today (S. 871) to create matched savings accounts and encourage savings. Congresswoman Stephanie Tubbs Jones (D-OH) and Congressman Joe Pitts (R-PA) introduced companion legislation in the House (H.R. 1514). They were joined by Representatives Rahm Emanuel (D-IL), Phil English (R-PA), Mike McIntyre (D-NC) and Kevin Brady (R-TX).

SWFA would provide for up to 900,000 IDA accounts over a ten-year period. These accounts reward the monthly savings of low-income families who are building toward purchasing a lifelong asset—buying their first home, paying for post-secondary education or starting a small business—by providing monetary incentives for opening accounts and matching the deposits of account holders. According to CFED, which collaborates with a nationwide network of 500 IDA account providers, there are currently 50,000 Americans saving through IDAs, currently funded chiefly by small federal and state programs and private foundations
“The need for federal action to increase savings is critical. Over the last two years, Americans recorded a negative personal savings rate,” said CFED President Andrea Levere. “We know that Americans with the lowest of incomes are the least likely to save but IDAs have proven that low-income workers can and will save if provided with incentives similar to those that are provided to moderate- and upper-income people.”

Under the Savings for Working Families Act of 2007, qualified financial institutions would receive a tax credit to offset the cost of matching deposits of IDA account holders up to $500 per IDA per year for four years. Account providers would receive a $50 tax credit per account per year to cover these costs. The accounts can be set up for any person aged 18-61 who meets earnings and other eligibility requirements.
To qualify for an IDA, the account holder must use the savings for specified purposes and must complete a financial education course before withdrawing any money.

Levere added that for the small community-based groups currently providing IDA support services, a key feature of the legislation is a provision of $20 million per year to help defray the program cost that organizations spend to recruit participants and provide financial education (For more information, check out CFED.org).