Individual Development Accounts Program
Based on a model from the Center for Social Development
SECTION 1. SHORT TITLE
This Act shall be known and may be cited as the "Individual Development Accounts Program."
SECTION 2. IDA PROGRAM
(A) DEFINITIONS-For purposes of this section:
1. "Community development organization" means any nonprofit religious or charitable association that is approved by the [Director of Economic Development] to implement the individual development account program.
2. "Department" means the [Department of Economic Development].
3. "Director" means the Director of the [Department].
4. "Individual development account reserve fund" means the fund created by an approved community development organization for the purposes of funding the costs incurred in the administration of the program, and providing matching funds for savings in individual development accounts to be used for approved uses.
5. "Federal poverty level" means the most recent poverty income guidelines published in the calendar year by the U.S. Department of Health and Human Services [or "Eighty percent of area median income" as defined by....].
6. "Financial institution" means any bank, trust company, savings bank, credit union, or savings and loan association approved by the Director for participation in the program.
7. "Program contributor" means a person or entity who makes a contribution to an individual development account reserve fund and is not the account holder.
(B) IDA PROGRAM ESTABLISHED -There is hereby established within the Department a program to be known as the "Individual Development Accounts Program." The program shall provide eligible families and individuals with an opportunity to establish special savings accounts that may be used for post-secondary education or job training, home ownership, major repair or improvement of a home, or small business capitalization.
1. The department shall solicit proposals from community development organizations seeking to administer the accounts on a not-for-profit basis. Community development organization proposals shall include:
a. A requirement that the individual account holder or the family of an account holder make deposits by contributing funds.
b. Specification of the population(s) targeted for priority participation.
c. Ability to comply with state IDA program requirements.
2. In reviewing the proposals of community development organizations, the Department shall consider the following factors:
a. The nonprofit status of such organization.
b. The fiscal accountability of the organization.
c. The ability of the organization to provide or raise matching contributions and contributions for program administration.
d. The ability of the organization to administer an individual development account reserve fund.
e. The significance and quality of proposed auxiliary services, and their relationship to the goals of the individual development account program.
3. The community development organization must administer, or contract with another approved organization to administer, a financial education program, classes, or seminars for IDA program participants.
4. No more than 20 percent of all funds contributed to the reserve fund may be used for administrative purposes.
5. The department shall promulgate rules and regulations to implement and administer the provisions of this act.
(C) QUALIFICATION AND USES -A family or individual , whose household income is less than or equal to 200 percent of the federal poverty level, may open an individual development account for the purpose of accumulating and withdrawing moneys for specified expenditures.
1. The account holder may withdraw moneys from the account for any of the following expenditures, according to an agreement with the community development organization:
a. Educational costs for any family member 18 years of age or older, at an accredited institution of post-secondary education.
b. Job training costs for any family member eighteen years of age or older, at an accredited or licensed post-secondary training program.
c. Purchase of primary residence or payment for a major repair or improvement of a primary residence.
d. Capitalization of a small business for any family member 18 years of age or older.
2. Financial institutions approved by the Department shall be permitted to establish individual development accounts for participants, with approval from an approved community development organization. The community development organization shall certify to the department, on forms prescribed by the Department and accompanied by any documentation required by the department, that such accounts have been established and that deposits have been made by or on behalf of the account holder.
(D) MATCHING FUNDS
1. For every $1deposited into an individual development account by an account holder, the community development organization shall contribute no less than $2. The community development organization may set a ceiling on the amount of matching contributions during a calendar year, with the consent of the Department.
2. For every $1deposited into an individual development account by an account holder, the state shall contribute an amount determined annually by the Director, depending upon available state funding. The Director may set a ceiling on the amount of matching contributions during a calendar year, with the consent of the state.
(E) OTHER WITHDRAWALS OF FUNDS
1. If moneys are withdrawn during a calendar year from an individual development account by an account holder, which are not withdrawn pursuant to subsection C of this act, all matching moneys for those deposits shall be forfeited.
2. In the event of an account holder’s death, the account may be transferred to the ownership of a contingent beneficiary. An account holder shall name contingent beneficiaries at the time the account is established and may change such beneficiaries at any time. If the named beneficiary is deceased or otherwise cannot accept the transfer, the moneys shall be transferred to the individual account reserve fund of the community development organization.
(F) TAXATION—Interest earned by, and contributions added to an individual development account are exempted from state taxation.
SECTION 3. EFFECTIVE DATE
This act shall take effect on July 1, 2005.