Susan Mosquedaⁱ

The Oakland Livingston Human Service Agency (OLHSA) in Pontiac, Michigan is one of 12 agencies across the country participating in the Savings for Education, Entrepreneurship, and Down Payment (SEED) initiative (see September EQUITY Feature article for more information on the SEED initiative). The OLHSA program is the preschool demonstration site for the project with the largest number of potential accounts. OLHSA's program is currently in the process of opening 500 accounts for three and four year olds enrolled in the Agency's Head Start program.

The SEED program at OLHSA focuses on assisting parents of Head Start children to save for post-secondary education. Our program uses the State of Michigan's 529 plan, the Michigan Education Savings Plan, for the accounts. The accounts are opened by the parent/guardian in their name and the beneficiary on the account is their Head Start child. The parent/guardian is the sole owner of the account. The SEED program makes an initial deposit of $800 into this parent-owned account. The child's family will have until December 2008 to access a 1:1 match from SEED of up to $1200. In addition, the State of Michigan offers a matching grant account for any family who meets the eligibility criteria (i.e. $80,000 Average Gross Income & child under age 6). The State deposits into this account, $1 for every $3 saved, with a maximum of $200. This account is owned by the State of Michigan for the benefit of the named child.

We have encountered barriers opening accounts for families receiving Supplemental Security Income (SSI) benefits. To date, 21 families who are receiving SSI benefits have expressed interest in opening this account for their child. Most are hesitant to open the account until they fully understand the effect this account may have on their benefits. Currently, only 6 have opened the account. Our understanding is that the account owned by the State of Michigan would not be counted in asset tests for SSI because the parent cannot access that money. The parent-owned account however, could cause problems with SSI asset limits. If a family receiving SSI opens a 529 account for their child in the SEED program, receives the $800 initial deposit from SEED and then proceeds to fully participate over the course of the program, such that they access the $1200 in match money, they would theoretically have $2000 in deposits alone. In addition, the hope is that compound interest would add additional money to the account. In a short time frame, this account could easily exceed the asset limits currently set for SSI benefits.

At this point, we advise people receiving SSI benefits that it may not be in their best interest to open this account. If they do open the account, we must discuss with them that saving enough money to gain the entire match money for their child may have an adverse effect on their SSI benefits. While SSI is not an all-or-nothing benefit when considering income, it is in regards to asset limits. This means that as a person earns more income, they gradually loose their cash benefits, but once a person achieves $2,000 ($3,000 for a couple) in savings- recipients loose the entire SSI benefit for as long as they exceed the asset limitation. Considering that Medicaid benefits are linked to SSI eligibility, the risks required for a parent on SSI to save for their children's future generally far outweigh the opportunities.

Asset limits that include accounts intended to help parents provide a better future for their children are unfortunate. Exclusion of these accounts from SSI asset tests is crucial for every child who is eligible for this program to benefit. The group most affected by this is the group with the least amount of control over their situation, the children. For many of the families, being able to provide for their child's immediate needs prevents them from giving their child the nest egg necessary to have a bright and prosperous future. Parents in this situation have no choice but to forgo the benefits the SEED program offers in the interest of maintaining a source of the family's income. We are hopeful that the rules will change in time for every family to take full advantage of this account and the SEED program.

See the September 2005 EQUITY Tip of the Month for specific policy recommendations.

This program is funded by a grant from CFED through financial support from the Ford Foundation, the Jim Casey Youth Opportunity Initiative, The Charles & Helen Schwab Foundation, The Citigroup Foundation, Ewing Marion Kauffman Foundation, Richard and Rhoda Goldman Fund, Evelyn & Walter Haas, Jr. Fund, and Edwin Gould Foundation for Children. Local support from the W.K. Kellogg Foundation.

i Susan Mosqueda received a MSW from Michigan State University. She is the Director for the SEED program at OLHSA. Prior to her position with OLHSA, she worked in foster care for a private agency and eight years with a Head Start program. For more information about this program, please contact Susan Mosqueda at 248-209-2790 or susano@olhsa.org.