Document Actions
EQUITY Feature Article
That’s right, strategies! With the right information and strategies, it is possible to participate in asset building programs and accumulate capital to start a business, purchase a home or pay for school. It is even possible to do all these things and still retain benefits. You can retain your Medicare, SSDI and even SSI, all while providing for your financial future.
Yes, you read right! Your financial future!
People with disabilities have the same rights and obligations to build their financial futures as everyone else.
As this December 2007 EQUITY issue goes live, and we start to think about our new year’s resolutions, the Access to Assets project wants to encourage people with disabilities to take more control of their financial futures. The time to strategize is now.
Admittedly, the Byzantine rules of many benefit programs seem designed to discourage people with disabilities from building assets. Most state and federal benefit programs apply both asset and income restrictions. This situation is further complicated where different programs have different rules and no one seems to be able to provide concrete answers.
This issue of EQUITY provides a few of these answers. While much should be done to clarify and simplify this situation, here are a few strategies available for people with disabilities to improve there financial lives now.
We’re not saying that pursuing these asset building options is easy, in fact, the rules can be complicated. These are sophisticated financial planning techniques designed to provide a starting point. No single program is going to lift someone out of poverty or magically provide unlimited disposable income. Programs that make such promises are lying! However, if you make the commitment, follow the rules, have a specific goal in mind and continue to work hard, over the long haul, you can start to build wealth.
The Individual Development Account (IDA)
An IDA is a savings account. What makes it special is that you receive an additional deposit each time you add to your savings. It is called a “match” and is usually 1 to 4 times the size of each deposit you make. For example, if you receive a 2:1 match, each time you deposit $25, you will get an additional $50 toward your savings goal. IDAs are a financial planning tool typically offered by non-profit organizations, and an excellent way to start building assets.
The IDA was originally designed to help low-income workers save for furthering their education, homeownership, or starting their own business. Some programs allow for other uses such as buying an automobile or computer. Individuals save regularly, typically over a 2-3 year period.
Each IDA program may have different requirements to participate. Generally speaking, however, participants must be within the income guideline of "200% of poverty". In addition to income guidelines, you must have "earned income". Earned income, defined by the Social Security Administration, is salaries, wages, tips, professional fees and other amounts received as pay for physical or mental work actually performed. Thus, the earnings are not required to come from a typical “9-5” or even part-time job.
Earnings can come from baby sitting, helping wash a neighbor’s car, helping someone with a term paper, shoveling snow, or selling products or information on-line. Basically, anything you do in exchange for money and a receipt can meet the earnings requirement for an IDA. Remember, even if you only earn $25 per month, and IDA program with a 3:1 match turns that $25 deposit in to $100.
If you do not meet these guidelines stated above, you should still pursue participation in an IDA program, because the IDA program nearest you may have more liberal guidelines. Additionally, most IDA programs have a financial education requirement for participation. You will learn how to reduce your debt, develop a savings plan and prepare for your savings goal. You may also learn about your credit history, banking, investing, and money management. The training may be in many forms. You may receive one-on-one counseling, classroom training, or peer support.
Income and Asset Limit Issues
Typically, if you receive SSI you are not allowed to have more than $2,000 in assets as an individual or $3,000 as a married couple. Medicaid differs from state to state on what is considered an asset. Assets include any readily available cash, like that in a savings account. However, there are some IDA programs that do allow you to have an IDA account, without losing your benefits. It is very important to get into one of these specifically designated IDA programs. Only federally funded IDA programs under the “Assets for Independence Act (AFIA)” or under “Temporary Assistance for Needy Families (TANF)” allow people who receive SSI to participate in IDA programs without losing benefits. Before entering an IDA program, it is VERY important to ask if it is funded by one of these federal programs. The same provisions that make TANF- and AFIA-funded IDAs exempt in SSI apply to all other federally-funded means-tested programs, including Medicaid and food stamps.
You can ask your IDA caseworker to write a letter on their program letterhead stating that you can participate in the IDA program without losing your SSI benefits. The letter should specifically mention the “Exclusions Under Other Federal Statutes” clause- AFIA IDAs SI 01130.679, TANF IDAs SI 01130.678. You should take that letter to your SSA caseworker for documentation and keep a copy of it for yourself. For a copy of a sample letter produced by CFED, please contact Tomas Foley, Access to Assets Project manager, at tom@wid.org.
Income Disregard
Another important feature of the TANF- and AFIA-funded IDAs is that SSA disregards, as income, any funds placed in the exempt IDA account when determining eligibility for SSI and the SSI benefit level.
As a result, just as with PASS accounts, these IDA accounts offer the possibility that some people with disabilities who are not SSI recipients due to excess income may be able to become SSI (and Medicaid) eligible by placing some of their earned income in the IDA. This may provide the person with the opportunity to establish eligibility for the Section 1619(a) and (b) work incentive provisions.
These provisions require that a person have had at least one month receipt of regular SSI cash benefits before he or she can become eligible for participation. In addition, current SSI recipients may be able to increase the amount of their SSI benefit by placing some of their earnings in an IDA account (unlike a PASS account which allows the use of unearned income such as a Social Security benefit for the contribution, only earned income or income that is related to earnings, such as an EITC refund, can be placed in the TANF- or AFIA-funded IDA).
Strategies for using non-federal IDA accounts
As discussed above, it is important for a person with a disability who is receiving benefits to enroll in a federally funded IDA program. However, there is not always a federally funded IDA program in a person’s particular locale. In addition, many states have recently introduced state-funded IDA programs with more flexible savings goals for people with disabilities. Currently, the only way to enroll in such a program and not risk benefits is to include the non-federal IDA in a Plan to Achieve Self Support (PASS). In this event, the Social Security Administration (SSA) excludes these assets for eligibility purposes.
Note: All PASS plans must be approved by the Social Security Administration and serve an occupational goal for the beneficiary.
Remember, all the strategies discussed above are merely starting points and no one program represents a silver bullet. However, saving money, investing in yourself and planning for your financial future are all activities that compound over time and can truly build wealth.
Yes, you read right! Your financial future!
People with disabilities have the same rights and obligations to build their financial futures as everyone else.
As this December 2007 EQUITY issue goes live, and we start to think about our new year’s resolutions, the Access to Assets project wants to encourage people with disabilities to take more control of their financial futures. The time to strategize is now.
Admittedly, the Byzantine rules of many benefit programs seem designed to discourage people with disabilities from building assets. Most state and federal benefit programs apply both asset and income restrictions. This situation is further complicated where different programs have different rules and no one seems to be able to provide concrete answers.
This issue of EQUITY provides a few of these answers. While much should be done to clarify and simplify this situation, here are a few strategies available for people with disabilities to improve there financial lives now.
We’re not saying that pursuing these asset building options is easy, in fact, the rules can be complicated. These are sophisticated financial planning techniques designed to provide a starting point. No single program is going to lift someone out of poverty or magically provide unlimited disposable income. Programs that make such promises are lying! However, if you make the commitment, follow the rules, have a specific goal in mind and continue to work hard, over the long haul, you can start to build wealth.
The Individual Development Account (IDA)
An IDA is a savings account. What makes it special is that you receive an additional deposit each time you add to your savings. It is called a “match” and is usually 1 to 4 times the size of each deposit you make. For example, if you receive a 2:1 match, each time you deposit $25, you will get an additional $50 toward your savings goal. IDAs are a financial planning tool typically offered by non-profit organizations, and an excellent way to start building assets.
The IDA was originally designed to help low-income workers save for furthering their education, homeownership, or starting their own business. Some programs allow for other uses such as buying an automobile or computer. Individuals save regularly, typically over a 2-3 year period.
Each IDA program may have different requirements to participate. Generally speaking, however, participants must be within the income guideline of "200% of poverty". In addition to income guidelines, you must have "earned income". Earned income, defined by the Social Security Administration, is salaries, wages, tips, professional fees and other amounts received as pay for physical or mental work actually performed. Thus, the earnings are not required to come from a typical “9-5” or even part-time job.
Earnings can come from baby sitting, helping wash a neighbor’s car, helping someone with a term paper, shoveling snow, or selling products or information on-line. Basically, anything you do in exchange for money and a receipt can meet the earnings requirement for an IDA. Remember, even if you only earn $25 per month, and IDA program with a 3:1 match turns that $25 deposit in to $100.
If you do not meet these guidelines stated above, you should still pursue participation in an IDA program, because the IDA program nearest you may have more liberal guidelines. Additionally, most IDA programs have a financial education requirement for participation. You will learn how to reduce your debt, develop a savings plan and prepare for your savings goal. You may also learn about your credit history, banking, investing, and money management. The training may be in many forms. You may receive one-on-one counseling, classroom training, or peer support.
Income and Asset Limit Issues
Typically, if you receive SSI you are not allowed to have more than $2,000 in assets as an individual or $3,000 as a married couple. Medicaid differs from state to state on what is considered an asset. Assets include any readily available cash, like that in a savings account. However, there are some IDA programs that do allow you to have an IDA account, without losing your benefits. It is very important to get into one of these specifically designated IDA programs. Only federally funded IDA programs under the “Assets for Independence Act (AFIA)” or under “Temporary Assistance for Needy Families (TANF)” allow people who receive SSI to participate in IDA programs without losing benefits. Before entering an IDA program, it is VERY important to ask if it is funded by one of these federal programs. The same provisions that make TANF- and AFIA-funded IDAs exempt in SSI apply to all other federally-funded means-tested programs, including Medicaid and food stamps.
You can ask your IDA caseworker to write a letter on their program letterhead stating that you can participate in the IDA program without losing your SSI benefits. The letter should specifically mention the “Exclusions Under Other Federal Statutes” clause- AFIA IDAs SI 01130.679, TANF IDAs SI 01130.678. You should take that letter to your SSA caseworker for documentation and keep a copy of it for yourself. For a copy of a sample letter produced by CFED, please contact Tomas Foley, Access to Assets Project manager, at tom@wid.org.
Income Disregard
Another important feature of the TANF- and AFIA-funded IDAs is that SSA disregards, as income, any funds placed in the exempt IDA account when determining eligibility for SSI and the SSI benefit level.
As a result, just as with PASS accounts, these IDA accounts offer the possibility that some people with disabilities who are not SSI recipients due to excess income may be able to become SSI (and Medicaid) eligible by placing some of their earned income in the IDA. This may provide the person with the opportunity to establish eligibility for the Section 1619(a) and (b) work incentive provisions.
These provisions require that a person have had at least one month receipt of regular SSI cash benefits before he or she can become eligible for participation. In addition, current SSI recipients may be able to increase the amount of their SSI benefit by placing some of their earnings in an IDA account (unlike a PASS account which allows the use of unearned income such as a Social Security benefit for the contribution, only earned income or income that is related to earnings, such as an EITC refund, can be placed in the TANF- or AFIA-funded IDA).
Strategies for using non-federal IDA accounts
As discussed above, it is important for a person with a disability who is receiving benefits to enroll in a federally funded IDA program. However, there is not always a federally funded IDA program in a person’s particular locale. In addition, many states have recently introduced state-funded IDA programs with more flexible savings goals for people with disabilities. Currently, the only way to enroll in such a program and not risk benefits is to include the non-federal IDA in a Plan to Achieve Self Support (PASS). In this event, the Social Security Administration (SSA) excludes these assets for eligibility purposes.
Note: All PASS plans must be approved by the Social Security Administration and serve an occupational goal for the beneficiary.
Remember, all the strategies discussed above are merely starting points and no one program represents a silver bullet. However, saving money, investing in yourself and planning for your financial future are all activities that compound over time and can truly build wealth.