2009 Legislative Priorities of the Asset Building Program

The ASPIRE Act – Universal, lifelong savings accounts
at birth

• The
  ASPIRE Act promotes lifetime
  savings, financial literacy, and opportunities for all young adults by establishing
  a progressively funded savings account for every child born in America.
• Each account receives $500 at birth. Households below
  national median income receive up to an additional $500 at birth and
  qualify for annual matching deposits, capped at $500 per year. 
• After-tax contributions are limited to $2,000 per
  year; earnings are tax-free for approved withdrawals.
• Between the ages of 18 and 25 funds can be used only
  for post-secondary education.  After
  25, withdrawals are also permitted for first-home purchase and (at age 59
  ½) retirement.

The Saver’s Bonus Act – Rewarding savings for low- and
moderate-income families at tax time

• The
  Saver’s Bonus Act rewards
  working-poor families who save their tax refunds for retirement, their children’s
  college education, and other purposes.
• The Saver’s Bonus Act matches the savings of
  low-income workers who save in IRAs, 401(k)s, 529s, Coverdells, Savings
  Bonds, and 6-month or longer Certificates of Deposit. 
• For taxpayers earning up to 120 percent of the
  EITC eligibility, savings are matched dollar for dollar, up to $500 per
  year, when families file their tax return. All matching funds are directly
  deposited into the preferred savings vehicle.

The New Saver’s Act – 14 low-cost ideas to promote
savings for all families

• The New
  Saver’s Act introduces a series
  of targeted, innovative and low-cost ideas to increase savings and access
  to financial services for all Americans.
• Specifically, the New Saver’s Act would bank the unbanked; create Young Savers
  Accounts; add college savings to the Saver’s Credit; revive and promote U.S.
  Savings Bonds; improve 529 college savings accounts; and promote asset
  building and financial education at tax time.

U.S. Savings
Bonds – Improving access and awareness of a vital savings tool

• U.S. Savings Bonds are an easy, safe way for
  millions of families to save for a broad range of purposes.
• The Treasury Department should reinstate the
  option to purchase U.S. Savings Bonds (Series EE and I) directly on tax
  returns using the “split refund” form 8888.
• Marketing funds should be restored to the program
  to increase awareness of U.S. Savings Bonds.

SAFE-T Accounts –
Electronic bank accounts for the unbanked at tax time

• For taxpayers who do not elect direct deposit for
  their tax refunds, a safe and affordable electronic banking account-a
  “SAFE-T Account”-is automatically provided, which can receive tax refunds
  and payroll deposits, pay bills, and hold savings.  Taxpayers who prefer to receive a paper
  check would still have the option to opt-out of the account.

Young Savers Accounts – Establishing a “Kids Roth” to
encourage saving by and for children

• Young Savers Accounts, or YSAs, are a “Kid’s
  Roth” that allow families, for the first time, to make tax-benefited
  contributions to a Roth IRA in their child’s name. Presently, there are no
  age restrictions on owning a Roth, but only those with earned income are
  eligible to make contributions.
• With YSAs, parents use their own contribution limits (now $5,000
  for those aged 49 and under), to make contributions.  Contributions to YSAs count toward that
  limit. No new tax shelters are created.
• Contributions made by low-income families would qualify for the
  Saver’s Credit, and all savings in YSAs would be excluded from determining
  eligibility for means-tested public assistance programs.

New Ideas for 2009 from the Asset Building
Program

Progressive 529s – Helping low-income families save
for their children’s college education

• Section 529 college savings accounts are
  administered by states and allow families to save for higher education
  expenses tax-free.  Accordingly,
  529s primarily benefit higher-income households.
• To enable more low- and moderate-income families to
  save in and benefit from 529s, Congress can:
  • Encourage greater
    transparency of 529s, including who benefits from 529s.
  • Building on
    innovations in various states, encourage all states to promote progressive
    innovations-such as matching deposits, automatic enrollment features at birth
    and other times, and deposits for good grades, etc.
  • Expand the Saver’s
    Credit tax credit (now restricted to retirement savings) to contributions to
    529s and Coverdells.

AutoSave – Promoting non-restricted savings at the
workplace

• To encourage savings, “AutoSave” would set up an
  automatic payroll deduction of after-tax wages into a non tax-advantaged savings
  account.  Non-restricted savings
  provide financial security for workers by creating a source of emergency
  savings.
• A pilot will be launched in 2009 to explore
  AutoSave’s feasibility among employers, employees and financial
  institutions.
• Currently no systematic savings policy exists to
  intentionally encourage short-term, non-restricted savings.

Financial Service Corps – Mobilizing financial
professionals to provide financial coaching for low-income households

• Today’s complex financial marketplace has become
  increasingly difficult for individuals to understand and navigate.  At the same time, there is a dearth of
  financial advisors to help low- and moderate-income families with these
  issues.
• A Financial Service Corps (FSC) should be established
  and integrated with other existing national service programs such as the
  Legal Services Corporation and AmeriCorps.  
• The FSC
  would be made up of financial experts, planners and advisors who volunteer
  their time to deliver one-on-one financial advice to low- and moderate-income
  individuals and families.
  

Rental Assistance Asset Accounts – Encouraging rental
assistance recipients to become economically self-sufficient

• Based on HUD’s successful Family Self Sufficiency
  Program, each recipient of rental housing assistance would receive an
  account.  Recipients currently must
  pay 30 percent of their income for rent. 
  As their earnings rise their rent increases, but under this
  proposal the increased rent payment would be placed in a personal account.
• Eventually the account balance would grow and
  recipients could use the funds to make a down payment on a house, invest
  in education or in some other way that advances their goals.
• A rigorous, multi-city pilot program should be
  launched to determine the ideal account design to take to scale.

Community Banks – Strengthening the financial services
sector by supporting small-scale community banks

• In 2008, the failure rate among big banks was
  seven times greater than among small banks.
• Small-scale community banks, thrifts and credit
  unions have the potential to help ameliorate many of the country’s deepest
  problems, such as the high level of concentration within the financial
  services industry and the lack of mutual interest between borrowers and
  lenders.
• A Community Banking Trust Fund should be
  established and used to make equity investments in small-scale depository
  institutions that need patient equity capital to serve their communities
  effectively.

The Basic American Mortgage – Simplifying and
improving the mortgage purchasing process

• Utilizing insights from behavioral economics, all
  borrowers would be defaulted into a standard mortgage product-the “Basic
  American Mortgage”-such as a 30 year fixed-rate mortgage loan with
  reasonable underwriting standards.
• Homebuyers would still be allowed to choose
  whichever mortgage best meets their individual needs.  Lenders however would face greater legal
  consequences if there is not straightforward and reasonable disclosure to
  homebuyers about the terms and risks involved in choosing an alternative
  mortgage product.

Green Bonds – Supporting families, communities, the
economy and the environment through small savings  

• Green Bonds would help strengthen the national
  economy, provide families with an incentive to save, create well-paying
  green jobs, and mitigate the causes of global climate change.
• Like War Bonds before them, Green Bonds would be
  a special version of the EE U.S. Savings Bond sold to the public, the
  proceeds of which would be used exclusively to fund green government
  infrastructure projects, such as retrofitting public buildings, expanding
  mass transit, constructing smart electrical grids, advancing bio fuels and
  wind and solar power projects.