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Lifting Asset Limits in Public Benefit Programs

Overview

Many public benefit programs – like cash welfare or Medicaid – limit eligibility to those with few or no assets. If a family has assets over the state’s limit, it must “spend down” longer-term savings in order to receive what is often short-term public assistance. These asset limits are a relic of entitlement policies that in some cases no longer exist. Cash welfare programs, for example, now focus on quickly moving individuals and families to self-sufficiency, rather than allowing them to receive benefits indefinitely. Personal savings and assets are precisely the kind of resources that allow families to move off of public benefit programs. States should eliminate asset limits from public benefit programs.

Policy Ratings

To see state-by-state policy data, click here.

Elements of a Strong Policy

The best option: Based on extensive research by many national and state organizations,¹ CFED considers a state’s asset limit policy strong if it has eliminated asset limits in TANF, Medicaid and SNAP.

Incremental improvements: The existence of an asset limit, no matter how high, sends a signal to program applicants and participants that they should not save or build assets. However, if a state has not yet eliminated asset limits entirely, it can take several intermediate steps to mitigate the disincentive to save.

• States can increase asset limits and/or index them to inflation, thereby reducing the likelihood that participants or applicants will reach the limit.
• States can exempt certain classes of assets from their asset tests in the TANF and Medicaid programs. While most programs exclude some “illiquid” assets, such as a home or defined benefit pension, many other liquid holdings, such as defined contribution retirement accounts (e.g., 401(k)s), health savings accounts, education savings accounts (529s and Coverdells) or individual development accounts, often count against the asset limits. States should exempt these types of assets. In addition, vehicles, which are vital for many to find and maintain employment, should be exempted.² States should also exempt Earned Income Tax Credit refunds for at least a year to provide a buffer for emergencies and unexpected expenses.³

CFED evaluated the strength of each state’s asset limit policies against the following criteria:

For TANF, has the state:

- Eliminated the asset test?
- Raised the limit to at least $15,000 or indexed it for inflation?
- Excluded four or more important classes of assets?

For Family Medicaid, has the state:

- Eliminated the asset test?
- Raised the limit to at least $15,000 or indexed it for inflation?
- Excluded four or more important classes of assets?

For SNAP, has the state:

- Eliminated the asset test?
- Raised the limit above $2,000?
- Indexed the limit for inflation?

Footnotes

1. CFED, the Center on Budget and Policy Priorities, the Center for Law and Social Policy, the New America Foundation, the Urban Institute and the Sargent Shriver National Center on Poverty Law and others have all examined this issue.
2. If eliminating all vehicles as assets is not feasible, then states could consider eliminating at least one vehicle for each working member of a household.
3. Leslie Parrish, To Save, or Not to Save? Reforming Asset Limits in Public Assistance Programs to Encourage Low-income Americans to Save and Build Assets, (Washington, DC: New America Foundation, 2005).