Clearing a Path to Savings: Removing Federal Barriers in Public Assistance Programs

Amy-Ellen DukeThe Center for Law and Social PolicyNovember 15, 2006aduke@clasp.org

Why Do Asset Limits Matter?

In order to obtain and maintain eligibility for means-tested programs, children and their families must meet certain income and asset limits Which may cause families to “spend down” their

resources to qualify for assistance or deter them from saving in order to maintain assistance

Some forms of income and assets are excluded from these calculations, others are not

Goal: To facilitate savings while not endangering families’ access to public assistance

Where are the Policy Levers?

Federal Government Supplemental Security Income Food Stamps (with increasing state flexibility)

State Government Temporary Assistance for Needy Families State Children’s Health Insurance Program Medicaid

No Flexibility: Supplemental Security Income

Provides need-based cash benefits for disabled or elderly low-income individuals To qualify must have little or no income and few

resources Average benefit depends on residence, but base is

$603/mo. Federal government sets SSI rules Assets impact eligibility, but not benefit level

SSI Asset Rules

Asset limits: $2,000 for individuals, $3,000 for couples—has not increased since 1989

Assets not counted: home, one vehicle if used for work or medical care, resources deemed inaccessible (e.g., defined benefit retirement plans)

Most state SSI supplemental programs mirror federal SSI eligibility rules

How does one Save in SSI?

Establish a Plan for Achieving Self Sufficiency (PASS): Supports asset accumulation Intended to further an occupational goal—save and

spend toward that goal Never approved for a recipient under 14; initially

only last for 18 months with extension to 48 months Vendor payments & limited uses (no food/shelter)

Must ensure any savings accounts and savings programs are structured in such a way as to be exempted under existing SSI rules; irrevocable trust (very difficult to set up)

Moderate Flexibility: Food Stamps

Rules set by federal government; states and counties administer the program

Assets affect eligibility but not benefit levels Two components of the asset test:

Overall asset limit is $2,000 ($3,000 if HH member is disabled or age 60 or older)—has not increased in 20 years

Portion of the market value of a HH’s vehicle that exceeds $4,650 counts toward the overall asset limit, unless state has liberalized vehicle limit—most have done so (with over 40 eliminating it)

401(k)s are exempt, though IRAs usually count (but new FS options may allow states to exempt them)

2002 Farm Bill: Proposed Regulations Support Savings

States may elect to exclude from Food Stamp asset tests most assets that the state excludes in either its TANF cash assistance or family Medicaid program (unless readily available to the HH) [7 U.S.C. §2014(e)(6)]

Cash and “amounts in any account in a financial institution that are readily available to the household” may not be excluded, but if certain savings inaccessible to the family (e.g., can’t be used for food and incur a penalty for withdrawals), then exempt (states can define “readily available”)

Proposed FS regulations allow states to exempt Individual Development Accounts for education, home purchase, and business start-up

Next Frontier on Federal Asset Limits

Food Stamps Liberalize asset limits Exclude retirement accounts from asset

determination calculations SSI

Liberalize asset limits (by flat amount or index to CPI)

Provide more exclusions for different types of savings (e.g., children’s savings accounts)