Contact: Kristin Lawton, 202.408.9788

May 7, 2009

Bipartisan, Bicameral Savings Bill To Expand Economic Opportunity For Working Families

Bipartisan, Bicameral Savings Bill To Expand Economic Opportunity For Working Families

Contact: Kristin Lawton, 202.207.0137

Legislation Introduced Proposes 2.7 Million Matched Savings Accounts

Washington. D.C. -- The House of Representatives and the Senate are tackling the economic crisis head on by introducing legislation that would give millions of America's low-income families the means to save and build financial security, according to the Corporation for Enterprise Development (CFED), a national organization dedicated to expanding economic opportunity. The Savings for Working Families Act of 2009 will expand one of the most promising tools for enabling low-income families to save, build assets and enter the financial mainstream—Individual Development Accounts (IDAs).

With bi-partisan and bicameral support, Senators Blanche Lincoln (D-AR), Joe Lieberman (I-CT), John Kerry (D-MA), Jim Bunning (R-KY), Olympia Snowe (R-ME) and Susan Collins (R-ME) as original sponsors, introduced the tax credit bill in the Senate yesterday (S.985) to create matched savings accounts and encourage savings. Representatives Earl Pomeroy (D-ND), Allyson Schwartz (D-PA), Joe Pitts (R-PA) and Kevin Brady (R-TX) introduced companion legislation in the House (H.R. 2277).

The Savings for Working Families Act would provide funding for at least 2.7 million 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, 85,000 Americans have opened an Individual Development Account: there have been 9,400 home purchases, 7,200 educational purchases, and 6,400 small business start-ups or expansions.

"With America's most vulnerable low-income populations feeling the immediate effects of rising unemployment and the broader impacts of financial volatility, opportunities for working Americans to save and build wealth are vital," 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 2009, 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 administrative costs. The accounts can be set up for any person aged 18-61 who meets earnings and other eligibility requirements. To qualify for the IDA match, the account holder must use the savings for specified purposes and must complete a financial education course before withdrawing any money.

Estimates suggest that each federal dollar invested in IDAs will yield a return of approximately five dollars to the national economy in the form of new businesses, additional earnings, new and rehabilitated homes, reduced welfare expenditures and human capital associated with greater educational attainment.

Levere added that for the small community-based groups currently providing IDA support services, a key feature of the legislation is a provision of $120 million per year to help defray the program cost that organizations spend to recruit participants and provide financial education. The IDA legislation is the only federal savings bill that supports small business investment, has a role for nonprofits and provides resources for financial education.

For more information on IDAs, please visit www.idanetwork.org. For more information on the legislation, visit http://www.cfed.org/go/swfa.

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CFED expands economic opportunity by helping Americans start and grow businesses, go to college, own a home and save for their children's and own economic futures. We identify promising ideas, test and refine them in communities to find out what works, craft policies and products to help good ideas reach scale, and develop partnerships to promote lasting change. We bring together community practice, public policy and private markets in new and effective ways to achieve greater economic impact.

Established in 1979 as the Corporation for Enterprise Development, CFED works nationally and internationally through its offices in Washington, DC; Durham, North Carolina; and San Francisco, California.